Kansas sales, income tax bill clears House to set up showdown with Senate

Tim Carpenter TimVCarpenter

Friday

Mar 8, 2019 at 5:05 PMMar 8, 2019 at 5:06 PM

The Kansas House approved a bill Friday allowing multinational corporations to avoid an estimated $137 million in state income taxes, lowering the sales tax on food by 1 cent on the dollar and requiring nonresident internet merchants to assess sales tax.

The Republican-led House's version of the bill included provisions adopted by the Senate in response to a federal tax overhaul leading to a windfall of tax revenue to the Kansas government. Majorities in both chambers want to help companies repatriate foreign income without paying state income tax. There exists broad support for allowing Kansans to itemize deductions on state income tax returns while taking the standard deduction on federal returns.

Cargill, Seaboard, Pfizer, Spirit Aerosystems and other multinational businesses operating in Kansas and the 10 percent of Kansans with of history of itemizing deductions wouldn't be able to avoid $187 million in Kansas income taxes if lawmakers declined to amend state tax law.

The House diverged from the Senate by including a 1 percentage point reduction in the state's 6.5 percent sales tax on food, which could save consumers $43.5 million annually. The House also moved to close a loophole allowing out-of-state retailers transacting business on the internet to avoid collecting Kansas sales tax. This could net the state $21 million to $33 million per year.

Rep. John Carmichael, D-Wichita, said the bill should be tossed on the political trash heap because it spent windfall cash the state had yet to receive and served to reward multinational companies that managed to shelter income from taxation for years.

That argument didn't sway Rep. Trevor Jacobs, who said he voted for the imperfect bill because it offered legitimate hope dollars would funnel to Kansas taxpayers.

"I agree with Andrew Jackson," said Jacobs, a Fort Scott Republican. "The wisdom of man never yet contrived a system of taxation that would operate with perfect quality."

Rep. Mark Samsel, R-Wellsville, said he reluctantly voted for the House version. He said it included important tax reforms, but believed his constituents deserved property tax relief, reliable education funding, infrastructure investment and better mental health services. State government, so far, has failed to address those higher priorities.

"I implore this Legislature, the governor and all others to use our intellect, experience and resources to help us cast a vote we can all be proud of. Please, let's deliver for the good, hard-working people of Kansas," he said.

Overland Park Rep. Nancy Lusk said she couldn't support the House bill because it placed the bottom line of large corporations ahead of interests of Kansas families.

"The food sales tax reduction of a mere 1 percent is not meaningful reform," said Lusk, in a statement endorsed by 20 House Democrats. "If we really want to reduce the burden on Kansans, we must address the issue head-on and not as a quick add-in."

However, Rep. Kenneth Collins, R-Mulberry, said he voted for the bill because it would level the sales-tax playing field between out-of-state internet businesses that don't collect the tax and in-state, bricks-and-mortar retailers who do assess the tax.

No Democrats voted for the House tax measure, but Olathe Rep. Charlotte Esau was among four Republicans who broke from GOP colleagues to vote against it.

Esau said laudable corporate and individual income tax provisions should have been placed in a bill separate from sales tax reforms. She said the pair of sales tax elements may result in collection of more state taxes "at the very time we are trying to avoid an unintended tax increase."

The Senate could concur with the House's adjustments or engage in negotiations on a compromise.

Democratic Gov. Laura Kelly during a Statehouse news conference the state shouldn't engage in major tax policy overhauls until the state's budget found a center of gravity.

"I never make a decision about what I'm going to do on a bill until I've actually had a chance to read it and fully understand what's in it," Kelly said. "We need to let the dust settle on our revenue situation."

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